Friday’s speech by the President of the President of the Federal Reserve, Jerome Powell, at the Jackson Hole Annual Economic Conference, occurs between an unprecedented pressure from the President of the United States, but the mixed economic data can lead Powell to a middle ground that leaves important unresolved.
Investors are waiting and Trump asks for a cut of interest when the Fed gathered next month and two directors of the Central Bank began pressing on the reductions with dissidents in the last meeting of the Central Bank, due to the concerns that the labor market could weaken faster than data at work suggest.
But the inflation continues above the 2% of the Fed objective and the expectation is to increase since the cost of Trump import rates is incorporated into detail prices, a cause for reducing interest during a process of adjusting the prices that some authorities believe that it can last until next year.
Reducing interest while prices are increasing and inflation is still above the lens can send a dangerous message to consumers by a Fed whose credibility in controlling inflation is one of their main goods, said the president of the Fed of Kansas City Jeffrey Schmid in an interview with the CNBC recorded on Wednesday evening before the conference. Schmid, the guest of the conference, voted this year with the majority to keep interest rates from 4.25% to 4.50%.
“The credibility of our anchor in this inflation number … it is very important,” Schmid said. “I think we have to pay attention to what the reduction of short -term interests would do with the mentality of inflation”, since the prices are still increasing faster than the Fed goal and should accelerate.
Powell will speak at 11 (Brasilia Time) in what will probably be your farewell speech on the Fed main search forum, since your mandate as president ends in May. Your comments should also reveal a new operational framework of the Fed that simplifies the most complex series of principles revealed to the conference five years ago.
As for monetary policy, some analysts expect a possible commitment. Powell can open the doors to a cut in September, recognizing the weakening of the growth of employment and the need to ensure that it does not weaken even more, without further committing anything until the authorities are more sure that any increase in inflation will disappear and that a single leap in prices will demonstrate.
This should not satisfy Trump, who says that interest should be reduced to about 1%, or investors who bet on various cuts this year, although bets also in a reduction in September wandering.
“The constant chorus that monetary policy is restrictive does not really adapt to data … And if I don’t think there will be an absolute crater in the labor market, which does not seem to happen, everything seems increasingly inclined to inflation,” said Adam Porsen, president of the Banco’s Economic Committee from England Bank. “I see that the forecast … continues in the direction of stagflation, increasing inflation and slowing down growth.”
Source: Terra
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